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The way the article frames the $350k competitive salary as a "problem" for startups is backwards.

If you're a businessman, you build a business that works with the prevailing pricing that's out there. That includes prices for everything such as raw materials, office rent, AWS/GCP cloud costs, government taxes & fees, and yes, high programmer salaries.

Complaining that your startup is "hurt" because AWS egress transfer fees are too high, or office sq footage $ is too high, or programmers cost $350k is counterproductive.

To think like a businessman, one has to turn that around: how do I build a more valuable business that can pay the high costs of the San Fran office and the $350k salary?

E.g., Jeff Bezos in 1994 isn't going to handicap himself because Microsoft was paying $100k salaries. Google in 1998 can't blame the difficult recruiting on Cisco and Sun Microsystems paying $100k salaries.

Either build up value in the business and/or include the high programmer salaries in the numbers when you ask VCs for money.

The other option, as other sibling comments noted, is to attract programmers who will work at a discount. Brian Acton & Jan Koum applied to Facebook and were rejected.[1] They are obviously not the worst programmers in the world and many of their caliber won't get $350k from Facebook/Google. See if you can hire overlooked programmers like them. Some will also work for a discount because they value the startup's equity or other intangibles. A startup entrepreneur has to hustle and make compelling propositions to these programmers.

[1] https://en.wikipedia.org/wiki/WhatsApp#2009.E2.80.932014




That's a reasonable tactical perspective. For the individual entrepreneur, it's valid.

That doesn't mean that this article isn't a valid complaint from other perspectives. E.g., It's totally reasonable that CEOs and investors will grumble about this. I'm sure Bezos, Page, and Brin were grumbling at the costs back in the day.

But I think the interesting perspective here is at the ecosystem level. If startups have to spend a lot more, it changes what's possible. We'll have fewer startups. We'll have less interesting startups. The incentive to pretend to be a zillion dollar winner is higher. As is the incentive to pursue artificially amazing growth rates. And to lie, cheat, and steal your way to making good on your sky-high valuations.

Personally, I think the startup world was way more interesting 10-20 years ago. The pressure to be the next unicorn is so intense that I think we've lost a lot. There are a lot of factors here, but I strongly believe that much higher living and operating costs is one of them.


This is why I'm kinda getting on board Courtland Allen's belief in indie startups. They're a counter reaction to that unicorn obsession of the current startup world. And the developer and entrepreneurial ecosystem is now such that launching and running small, competent businesses with useful products/services is easier than ever.

In other words, yes, the ecosystem is starving out traditional startups. But it seems like it's making a breeding ground for indie startups. They don't suffer the cost of a $350k/yr salary, which gives them a nice advantage.


Definitely. A friend is bootstrapping a company that she just loves. It will never be a unicorn, but it doesn't have to be. They already have a bunch of wildly satisfied customers, good press, and excellent prospects for sustainable growth. This is probably the last year she'll have to consult on the side to pay the bills. And she's so happy with it.


> If startups have to spend a lot more, it changes what's possible. We'll have fewer startups.

Paying higher salaries and spending more on development are related but distinct things.

You might be able to get more done by having fewer, higher paid employees. Or maybe you need have more of a mix of different ability levels to keep costs down.

> If startups have to spend a lot more, it changes what's possible.

Sometimes the business plan is just not workable. Why blame employees for expecting higher pay and not customers for not being willing to spend more? Or other cost centers for not being cheaper?

> There are a lot of factors here, but I strongly believe that much higher living and operating costs is one of them.

Yeah, that for instance.


What makes you think I'm blaming anybody?


I agree with most of your comment. One thing to note though is the whole scandal where Steve Jobs colluded with other firms into a non-poaching kind of agreement, essentially distorting the market. So that is a possible outcome as well.


If it weren't for the relentless attack on wages via wage fixing cartels, visa abuses, outsourcing, etc. we would likely be seeing the very top engineers making close to $1M per year.

Far from that "hurting startups" it would be a benefit to all tech workers as wages would rise across the board.

This framing of "hurting startups" is a euphemism for "hurting investors" or "hurting the wealthy". It's roughly the same complaint as when they claim that there are "tech worker shortages".

They want to pay employees pennies on the dollar, full stop.


We are seeing the very top engineers making close (or over $1M a year)... just that the percentage is quite small. Like a handful of people at big 5 tech, and a few in finance.


I would say that it's kind of the opposite. Having high developer costs means that you need investors in order to scale. This helps investors because it means if you want to succeed, you need to get investors, which they can use to their advantage to get more desirable terms for them and their rich friends.


Yes, good point. I think perhaps, as many things in life, it's a double edged sword.


This is really just another symptom of growing wealth inequality, which affects businesses just as it affects individuals. Qualified people are a finite resource, and consequently, the greater the wealth gap between the richest companies and cash-strapped startups, the smaller the share of talent that startups will be able to recruit. This in turn will take competitive pressure off the richest players, enabling them to widen the gap even further. Contrary to popular belief, there is no 'invisible hand' that acts to counter this feedback loop. Just envisioning how to build a more valuable business is no solution, because if you cannot access the capital or personnel needed to bridge the gap to profitability, your vision will not matter. As time goes on, a smaller and smaller portion of the population will be wealthy enough to bridge that gap, even as overall average wealth increases.

It's true that startups have always had to deal with better funded competitors that could pay more. But what you're not accounting for is that that gap is increasing over time, and there is a point where the lead becomes insurmountable.




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